“The terms of the agreement include a guaranteed payment to the Navy of $55 million, followed by an interim payment of another $50 million, plus an additional share of potential further profits,” Mayor Gavin Newsom and the Navy announced in separate Dec. 16 press releases.

San Francisco officials originally hoped to secure the land for free.

The purchase price will be paid for up by private partners working on the redevelopment project, according to Michael Cohen, who serves as Mayor Gavin Newsom’s economic adviser.

The first payment is likely to be due after ownership of the 450-acre island is conveyed to San Francisco, according to Cohen. Payments are expected to be spaced out over approximately a decade, he said.

“There’s no signed agreement, but we’ve been working for a number of years on trying to get an in-principle agreement with the Navy,” Cohen said. “The fact that the Secretary of the Navy and the mayor shook hands on the structure of a deal is significant. We do have to put pen to paper and work with the lawyers.”

The costs will be repaid using redevelopment profits and as little as $55 million could be paid to the Navy for the island if the project underperforms financially, according to Cohen.

Those private partners are also expected to incur more than $1 billion in infrastructure costs and billions more in building and construction costs during work that’s expected to begin in 2011 and last for at least a decade.

Doug Gilkey, the Navy’s Base Closure Manager for Treasure Island, where Pacific war operations were directed during World War II, said he expects an agreement between the Navy and The City will be signed early next year.

“A term sheet or memorandum of agreement has not been completed,” Gilkey said in a statement. “The Navy and city will be working through the details of a memorandum of agreement over the next three months.”

Revenue from sale of the island will be placed into a U.S. Base Realignment and Closure Division account, according to Navy spokeswoman Melanie Ault.